If you are employed under PAYE there are some jobs where external education is a contractual obligation and is therefore considered to be allowable for tax relief.
These usually involve research based jobs or careers that include training phases that necessitate external education as part of the employment contract.
What you have to prove to claim tax relief for training
As an employee, you must be able to support any tax relief claim with the following evidence;
- There is a mandatory requirement for external training that is inextricably linked to the terms of employment.
- If you do not successfully complete the training for the requisite qualifications then you will not be able to hold your current job; which you would have retained with the relevant training.
- Your whole job is part of the training process, with the intention that the practical and theoretical aspects combine to develop essential skills and knowledge.
- The external training in question is an intrinsic element of your employment contract.
Training course tax relief example
In 2010, the Court of Appeal ruled in favour of Dr Piu Banerjee and allowed the deduction for training costs because if you are employed on a training contract then training is an “intrinsical contractual duty”. (HMRC V Dr Piu Banerjee EWCA Civ 834) The Court also ruled that there was no potential for a ‘dual purpose’ issue as any personal benefit would be “incidental”.
What training courses you can’t claim tax relief for
Both HMRC and the Court of Appeals are very strict about what circumstances are applicable to education and training costs.
Generally speaking, no external training or educational courses you undertake will be allowable for tax relief. This is even the case where the subject matter of your course directly relates to your job.
The reason for this comes down to specific definitions. HMRC only allow tax relief for things that are “incurred in the performance of the duties of employment”. It must be part of ‘doing’ your work; not something you need to do to start, or keep, your job.
Activities that are part of preparation to do work are not considered to be the same as ‘doing’ the work.
Training and educational courses may well be highly relevant to your role, but they are often classed as preparatory activities for the purposes of tax relief.
Continuing Professional Development for tax relief
This is not normally an allowable expense, as demonstrated by The Special Commissioners during Consultant Psychiatrist v CIR (SpC557). This concerned the CPE expenses of a consultant working for an NHS Trust. It was denied, as was another case involving a doctor’s seminars’ costs. (Parikh v Sleeman, 63TC75) Whilst these rulings are not binding precedents, it does clearly show the current attitude towards such claims.
Overseas Conferences, Study Tours and Courses for tax relief
Again, you must be able to show that your conference, course or tour is part of the “performance of your duties”. If you can then the most common tax reliefs are for subsistence, accommodation and travel costs. Sometimes this can also fall under the rule concerning travel to a temporary workplace. All cases must be looked at individually.
How to claim tax relief for training courses
If you are an employee under PAYE and do not complete a self assessment tax return you should complete an HMRC form called a P87.
The P87 can be completed online or printed off and posted to the tax office where HMRC will review your claim and repay any tax rebate in due course.
If you complete a self assessment tax return you can include your training expenses in the relevant employment section of your tax return.
Training courses for the self employed
If you are a sole trader or run a business in some circumstances you eligible to claim for the cost of training and professional development.
HMRC states that you can claim allowable business expenses for training that supports your knowledge and skills in your business and give an example of a refresher course.
In contrast training courses that help you set up a new business or expand into different areas of business that are unrelated are not generally classed as allowable business expenses.
